BRUSSELS – What is wrong with Europe’s banks? The short answer is that the sector is too large, has too little capital, and contains too many players that lack a viable long-term business model. It is the combination of the last two factors – an overabundance of banks with no sustainable way to turn a profit – that constitutes the most serious and most difficult problem.
The banking sector’s size is a cause for concern because, with total liabilities amounting to more than 250% of the eurozone’s GDP, any major problem could over-burden public budgets. In short, the banking sector in Europe might be too big to be saved.